The Best Mortgages For Wealth Planning
November 15, 2022
Choosing the right high-net-worth mortgage plan can significantly improve the long-term results of wealth planning. These plans go beyond financing a property, as financial institutions recommend tailored mortgage plans according to a combination of assets and liabilities. Generally, mortgages for high-net-worth individuals should offer flexibility and visibility while considering multiple sources of income.
Unlike regular mortgages, high-net-worth mortgages require individuals to consider more than the borrowing period and interest type. Collaborating closely with a qualified and experienced financial institution can help individuals discover the most suitable mortgage that supports their unique wealth planning needs.
Jumbo Mortgages
Jumbo mortgages refer to loan types that exceed the conventional limits set by the Federal Housing Finance Agency (FHFA). Lenders may define jumbo mortgages as high-risk arrangements since they exclude governmental guarantees, requiring stricter guidelines than conventional mortgage loans.
The expanded limits of jumbo mortgages make them appealing for purchasing and refinancing primary and second homes. Jumbo mortgages allow for one single loan versus multiple loans and are also a convenient way for borrowers to secure funding for expensive home purchases. Typically maintained by the original lender, these mortgages are not guaranteed or insured, which makes them riskier. Every jumbo lender uses its own standards for making these loans.
Prerequisites for Jumbo Mortgages
Borrowers of jumbo mortgages must have excellent credit as evidence of their ability to make timely payments. Most lenders require higher credit scores to qualify for jumbo mortgage loans than would be required for conforming loans. Jumbo borrowers may also need a higher income to qualify as evidence of ability to repay the loan, and debt-to-income ratios are typically more stringent than they would be for a conforming loan.
Another consideration is cash reserves; most lenders require extensive reserves beyond the down payment to help safeguard from defaults. Often, jumbo lenders require a minimum of 20% down.
Advantages of Jumbo Mortgages for High-Net-Worth Borrowers
Through jumbo mortgages, high-net-worth individuals may significantly broaden purchase and investment options by exceeding lending limits and including properties in areas that might not qualify as high-cost by the FHFA. Additionally, jumbo mortgages may offer improved interest rates compared to conventional mortgage loans, optimizing wealth planning.
Non-Traditional Mortgages
Non-traditional mortgages include flexible loans offered to current bank clients. Designed to fit the client’s specific needs, these loans have a maximum 5-year term, are amortized over 30 years, and can have interest-only options and balloon features. The features include purchasing or refinancing a borrower’s primary or secondary residence.
Interest-Only Loans
Interest-only mortgage loans require borrowers to only pay for the loan interest within the first 5-10 years of ownership. Borrowers do not include principal sums in the loan repayment, significantly reducing initial payment rates.
Prerequisites for Interest-only Loans
The borrowers of interest-only mortgages may require much higher down payments than conventional mortgages and a low debt-to-income ratio. Individuals may need an excellent credit score, and borrowers must submit ample documentation of assets and cash reserves.
Advantages of Interest-only Loans
These mortgage programs work best for high-net-worth individuals who aim for short-term ownership and fast returns. Interest-only loans can give buyers significant cash savings in the short term by eliminating the principal cost from initial payments.
Additionally, the mortgage type typically functions as adjustable-rate loans that could further reduce fees during the interest-only term. Investors may qualify the entire monthly payment amount as tax-deductible for mortgages valued up to $750,000, freeing additional cash for improved wealth planning. Please consult your own tax advisor for deductibility of interest specific to your situation.
First Western Trust – The Mortgage Expert for High-Net-Worth Individuals
The specialized team at First Western Trust offers decades of experience in mortgage expertise. First Western Trust provides the most suitable mortgage program catered to each high-net-worth individual’s specific needs and requirements. These comprehensive program options range from jumbo mortgage loans to second home loans and interest-only mortgages.
First Western Trust’s mortgage specialists believe in identifying and discussing the relevant wealth planning details to offer tailored solutions for optimal outcomes. The specialized team handles each investment decision internally, without involving third-party mortgage brokers.
Reach out to First Western Trust to discover the most effective high-net-worth mortgages for meeting wealth planning goals across even the most complex financial situations.
